The more I read this thread the more I realize that I have no idea what we are doing. 
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As long as you donāt plunk all your $$ into that dog coin, you are doing great! 
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We deal with many folks who did virtually no non-qualified planning. May be too late for many on this thread (or not), but at least discuss with your kids the benefits of tax diversification along with asset diversification. Good to have different buckets to draw from and control taxation in retirement.
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Are your other tax deferred accounts IRAs? If so this negates much if not most of the advantage of the back door Roth.
@Colorado_mom When Roth IRAs first were available (at the tail end of us being DINKS - dual income no kids) we should have put max in Roth and put less in 401k (we put in max on 401kās and could have dropped down to what was matched or somewhere in between). When one is younger and having a lot going on with career, family, etc. - plus it was setting up the Roth at that point which was the little hurdle for me at the time (not an offered option at either of our employers).
We attended a two night program with a binder from Financial Educators Network (we paid for material, under $50) in 2013 and liked our presenter. We had received info in the mail about the program and responded. After the education stuff was completed, we set up for a meeting with the presenter. The problem we had was we needed our portfolio to be diversified - and needed to see some recommended options. After a series of meetings, we had financial guyās company handle all our funds except those from Hās 401k which Hās company continues to pay plan expenses - and we have a very good selection of investment choices in that 401k plan (with one of the large companies - we have dealt with these three over the years with plans - Dreyfus, Principal, and Prudential - this one is through Prudential).
Our financial guyās group holds semiannual āState of the Marketsā - which is for current and potential clients. Along the years, with semi-annual personal meetings, we have āshapedā our nest egg with the level of risk we are comfortable with. We had some IRAs that we converted to Roth IRAs - the size of those accounts didnāt bump us up in tax rate categories, but we bit off the tax in one year ā which some may have done over a spread of two or more years instead. We had a SAR-SEP which we moved. All the loose ends.
We also just attended a meeting on āunderstanding social security and medicareā - the presentation material was by AFEA - American Financial Education Alliance. The presenter was also available for individual consult meeting - and again someone who was looking for clients. It solidified (to a degree) my understanding of it. Because Medicare has some growing options (With the Medicare Advantage plans) the terminology from another perspective besides the Medicare or SS govāt web sites. Followed a bit on College Confidential threads too. Investigating insurance plans.
We are āreattendingā the two night āFinancial Educators Networkā program - presenter is a partner to our financial guy. It refreshes us but I also wanted the updated info on guiding our DDs who are in their 20ās. We actually had started Roth IRAās for them. They are a way away from structuring beyond current savings for permanent job location/home purchase.
There is something to current and future tax strategies. The tax strategies change as time goes on. So it is thinking about it, spending the time on researching, spending the time for having the right financial person/advisor, and acting on things over time.
For next generation, for some of us, it may be using the gift tax limits year by year as an option as to how to have our hard earned resources benefit our family beyond benefiting us in retirement. Set up college funds for grandkids.
@bluebayou you are right about guarantee and risk-free.
We have the risk degree in our portfolio that we are comfortable with.
Over time we had certain annuities we purchased through FAās find, that have guarantee returns built into the initial offers that are even beating the 8%. 3 annuities are at 12 year maturity and two are at 10 year maturity. With our 6 month appts with FA, we will continue to look at the picture.
The time value of money and what are oneās options; what is oneās risk level.
H has a lot of longevity with his family while I do not. However I intend (wink wink) to outlive DH.
Haha - so much the same! Donāt really know why we need a Roth. And I think thatās investing 101?
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@srparent15 we didnāt know the ārulesā with Hās 401k until he retired, outside of transferring some of his 401k money (after he was 59 1/2) into annuity purchases (which the annuities have done well and helped lower our portfolio risk). Because his company pays for 401k expenses in retirement, we have kept that overall management, and now have a FA through them as well - although if he is out of the office, we can use the 800# and get someone to do our transaction.
One has to look at tax bracket one is in, and the opportunity to make changes as well.
Once I check out some of our options for health insurance coverage in addition to Medicare (decisions and sign up by Sept), will make appt with FA to see what we do want to do about SS. We donāt get full SS until age 66 and 4 months.
Hās older brother is waiting to quit work after he is 66 and 4 months and he gets his annual managerial bonus.
Sept 2017 Social Security Administration, Publication # 13-11785 (SSA has temporarily suspended updates to chart at time Financial Educators Network put together the 2020 program info):
āSS was always intended as a supplemental income source in retirement. However too many retirees rely too heavily on SS for the bulk of their retirement income.ā
Income of people 65 or older (Chart):
SS 33%
Earnings (Job) 34%
Pensions 20%
Asset Income (401k etc) 9%
Other (4%)
āInheritances: The US population is currently experiencing the largest transfer of estate assets in our history.ā However, typically those that are from families with inheritances also are IMHO people who plan for retirement and are not in the percentage of people who work while drawing SS because they have to.
The difference in the monthly SS check if you draw SS at age 62 and age 70 is 76%. My brother who is wealthy, is delaying receiving SS until age 70 because he can easily afford to and he likes the guaranteed 8% growth. He had quit smoking and is living a healthy lifestyle - so we will see if it pays off for him.
I know this is a retirement thread but I just encountered something for the first time in preparing one of my kidās tax returns and figured this thread is the most knowledgeable on these subjects maybe someone would know the answer.
I prepare all 4 of my kidās returns, 2 of mine are dependents and 2 arenāt. My youngest as I was getting to the end of it, the issue of kiddie tax came up. Upon researching, sure enough he falls into that because he earned too much unearned income. Lucky for him! Canāt imagine how many of those gamestop investors that are teens will as well. Anyway, am I correct that in order for me to file his return, my return needs to be completed as well because we need to know what marginal bracket weāre in to know what he will have to pay? That said, if I know ours is going on extension, should I just put my sonās on extension now also?
I know I can put his income under mine on our return however, my son also has a little business of his own that has earned income so he has to file a return either way.
small nit: technically, annuities are guaranteed either, since they are subject to bankruptcy of the insurer/annuity backer.
yes @bluebayou that is true - govāt only let one big financial group fall (Leeman Brothers) while helped out a big insurance company (I guess they felt they couldnāt let that fail).
I feel pretty good about our annuities ā with Nationwide and Allianz. We have cash value insurance with Northwestern, and I feel pretty secure about that.
Well the govāt guarantee sounds like not so much of a guarantee after 2035 - I think there will be too many voting seniors to do more than a āhaircutā.
Demographic Trends on SS (from SSA Annual Report 2019):
In 1945 the ratio of workers to SS beneficiaries was 41.9 to 1
In 2020 the ratio of workers to SS beneficiaries is 2.7 to 1
In 2035, SS projects a ratio of workers to beneficiaries of 2.2 to 1.
I could certainly see cuts to social security for those that have saved or have other sources of income for retirement. I could also see income cutouts lifted for high earners contributions.
Just like direct payments to Americans are being phased out under the stimulus bills a similar situation could happen regarding SS. Those that have private pensions providing X dollars or above could be cut off from receiving SS or benefits offset by those payments. Those that have X dollars or above in IRAs or 401ks could have their SS cut off or greatly reduced. Itās probably coming. The SS system will reach a crisis era. It will be much easier to reduce or eliminate payments to those that have saved for retirement in other ways or have pensions coming.
Yes, you have to complete your return in order to complete his return. I cannot recall exactly which figures had to be pulled from my return, but maybe AGI, capital gains, and dividends? I have already suppressed that knowledge even though I only completed the returns a few days ago.
Kiddie tax will rear its head for fellowship awards reported on 1099-MISC in box 3 as Other Income. Very annoying. If the university had issued the summer research award as W-2 earnings, no tax would be due as long as the total earned income was below the standard exemption.
Your trading son will receive a $350 deduction against his earned income but the rest is taxable at your rate. Also, ask if he donated money anywhere last year. Part of one of the stimulus acts allows for up an up to $300 deduction for charitable donations, even for people who do not itemize. Donations must be in cash, not in kind.
No idea on what to suggest about extension, but I would assume so.
@MarylandJOE I can not see justifying people that have paid in would have cuts with their SS due to their stable financial circumstances, but they may tax more of the benefits for those in higher categories (right now married filing jointly can have up to 50% of SS benefits taxed with SS $32,000 - $44,000). I guess the way it works is below $32K is not taxed and then the money above that may have 50% tax. Some people pay quarterly estimated taxes or elect to have federal income taxes withheld from SS.
Fed Govāt easy out is raising taxes.
But we shall seeā¦
My spouse thinks as you do. Frankly, I think that will be a tough sell. Most of the folks who have enough for retirement were also high income earners who paid the most into the SS system.
Itās easier to move SS back a few years then tske it away entirely from a class of people. I think weāll see in the next few years how far the pendulum can swing.
But there are VERY few people who have enough $ to forego SS AND will not make a stink if government tries to seize their SS on the basis that they exceeded expectations. Pretty sure those who receive a pension ( public only maybe) canāt fully double dip into SS as well. That certainly makes sense.
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Some people of Generation X have long known that Social Security would get into funding trouble by the time they retire, since the promised benefits exceed what is being paid in (and that it is not a genuine funded pension plan, even though it is āsoldā as such where the taxes paid while working are implied to be but not actually set aside for your retirement benefits). Those who have realized the problem may have planned retirement savings assuming that any Social Security benefits would be a bonus, not something to depend on to be there (younger people planning retirement savings ought to look at Social Security this way). Of course, some of them may still complain if their benefits are cut. Stealth cuts by shaving the benefit through raising the retirement age, less favorable inflation adjustments, changes in how income tax interacts with Social Security benefits, etc. may be less visible and less likely to be complained about.
Perhaps a bigger issue may be Medicare. Medical care cost inflation will likely either make Medicare a budget buster, or result in benefit limits so that Medicare age people need to share more of the cost (through Medicare premiums and/or Medicare supplement or Medicare Advantage plan costs). Assuming the latter, people planning retirement savings need to consider increasing spending on not-covered-by-Medicare medical costs both due to Medicareās financial situation and due to oneās own estimated increasing age-related medical conditions.
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I agree that something needs to be done. Honestly, seems like the best idea IMO would be to raise the retirement age. People live longer so it would mean people collecting for fewer years as the program was designed. But these programs are very sticky downward, itās unlikely that someone on the losing end is going to comply easily.
@Happytimes2001 They already did raise SS age for full benefits from birth year 1943 - 1954 100% benefit at 66 years up a few months each year to 1960 or later with full retirement age at 67.
France had lots of civil servant protesting when they were raising from age 60 to maybe age 62?
Medicare at 65 is reasonable. There are people that work for the govāt or that have Tri-Care from military service that have insurance coverage with earlier retirement and service - they pay for it with govāt employment but it is at the group rate.
Having the additional payment for Medicare Supplement, Medicare Advantage Plan, Drug Plan adds to the basic Medicare A for seniors. Already cost sharing.
The ones who are not paying are the Medicare/Medicaid folks who may have just a bit of SS to live on - or they may have been SS Disabled. Yes we need to care for the truly disabled and for the truly elderly disadvantaged.
Federal govāt is trying to bully states to expand Medicaid - and Feds pay first few years and then the state picks up the tremendous costs.
As soon as the money stops getting printed printed and taxes get raised, we will see what the fall out is. Have to avoid runaway inflation. Many issues keep going on with the feds that are tying up thought and action and not working on plans for stuff like this.
I believe social security was set up as an entitlement for retirees to supplement other income. There is no fund youāre paying into with your name on it. Workers are all being taxed to provide for payments those that currently qualify. There is zero guarantee that entitlement will be there in the future. Gen-X here. I have saved with the assumption that SS wonāt be there. I am not depending on it being there because the system is not being funded enough to be solvent in my retirement years.
The average 401k balance for a 65 year old is $192k. The median for that same sge is $58k. That wonāt go very far. Many people have very little in the way of retirement funding. On the other end, many individuals have quite a bit from either private pensions, IRAs, 401ks or just accumulated wealth to fund their retirement. Just like those that earn more are expected to pay more in taxes to fund many things they donāt necessarily benefit from, I can see a time in the not so distant future when social security is shifted to be only available to those that actually need the government to provide for them. If youāve saved and are able to provide X amount then youāll be ineligible for benefits so that the system can remain solvent longer.
I hope Iām absolutely wrong. A lot of money gets paid into SS but it was never meant to be the sole source of retirement funding and it wasnāt meant to provide for so long of a retirement. Something will have to change. If 80% of retirees still get their SS and the 20% that have other means have to support themselves their will be popular support (80% of people) for this change to keep the system going. Again, I hope I am wrong.